Review: LIC New Jeevan Anand, a participating endowment policy

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LIC New Jeevan Anand is a participating, non-linked endowment insurance policy. Participating means that you get a share of the profits of Life Insurance Corporation (LIC) of India as a policyholder. Non-linked means that it is not ‘unit linked’ and there is less equity exposure than a ‘Unit Linked’ plan or ULIP. Endowment means that the policy has a maturity value.

Death Benefit

In case of your death during the term of the policy, your nominees will get the higher of:

10 times the annual premium

125% of the Basic Sum Assured. The Basic Sum can be 10 to 30 times your annual premium depending on the length of your policy term. Look at the premium table at the end of this article to get a sense of the relationship between your premium and basic sum assured.

Maturity Value

This will be the Basic Sum Assured plus Simple Reversionary Bonus and Final Additional Bonus (if any). Note that though LIC uses the word ‘bonus’ these amounts are not really bonuses. They are just terms to express your share of LIC’s profits which the policy is meant to give you.

Surrender Value

If you surrender the policy or fail to pay your premiums for the first three years, you lose all the money you have paid for it.

After three years, the policy acquires a surrender value which is basically a fraction of the premiums you have paid. This fraction goes from 2% to 35% depending on your policy term and when you stopped paying. In other words, surrendering before maturity will get you at most 35 rupees back for every 100 rupees you have paid.

Paid up value

Instead of surrendering the policy after three years, you can also ‘convert it to paid-up’ or in other words, let it lie without taking the money. In this scenario, the Basic Sum Assured gets reduced in terms proportionate to the number of premiums you have paid. For instance, if you have paid 5 years’ premiums in a 20-year policy, the Basic Sum Assured gets reduced to 25% of the total. All bonuses (share of profits) which have been declared until the time you stopped paying also get added to the value of the policy. However, the catch is that the paid-up value is only paid to you on maturity (at the end of the policy term) or to your nominees on your death.

Lapse and Revival

If a policy lapses due to your failure to pay premiums, you can revive it within two years of the lapse by paying the unpaid premiums and interest on them. The rate of interest is fixed by LIC.

Accidental Death and Disability Rider

This is an optional feature that you can latch onto your basic policy. It will pay out an additional lump sum called ‘Accident Benefit Sum Assured’ to your nominees in case of death as a result of an accident.

Instead of dying, if you become permanently disabled as a result of an accident, the rider will pay you the Accident Benefit Sum Assured as income for 10 years following the accident. It will also waive off all future premiums on the basic life policy and on the Accident Benefit Sum Assured rider itself.

Maximum Accidental Benefit Sum Assured: Equal to Basic Sum Assured under the basic plan. However, a Rs 1 crore total limit applies to the sum of all life policies taken by the policyholder.

Minimum Age of Entry: 18 years

Maximum Age of Entry: Any time during the subsistence of the basic policy but not later than 70 years of age

Premiums can be paid monthly, quarterly, half-yearly or annually. The policy will be declared void if you commit suicide within 12 months of commencement of the policy or 12 months of reviving a lapsed policy. In this case, only 80% of your premiums are refunded to your nominees and the Basic Sum Assured and bonuses are not paid out.